Virgin Galactic Proposes Reverse Stock Split

Virgin Galactic is set to propose a reverse stock split to its shareholders in an effort to elevate its dwindling share price. The move comes amidst a backdrop of tumbling stock values and strategic shifts within the company.

In a press release issued on April 18, Virgin Galactic unveiled its plans through a proxy statement and notice of its upcoming annual meeting scheduled for June 12. Among the list of proposals outlined in the statement, one significant measure stands out: a call for shareholders to greenlight a series of amendments to the company's certificate of incorporation, facilitating a reverse stock split ranging from 1-for-2 to 1-for-20.

This maneuver aims to consolidate existing shares, with the conversion of anywhere between 2 to 20 shares into a single new share, as decided by the company's board. The ultimate objective is to boost the share price, which has seen a steady decline. 

As of April 18, Virgin Galactic shares closed at a mere $0.97, hitting a distressing 52-week low of $0.90 earlier in the day.

Explaining the rationale behind the reverse split in the proxy statement, the company emphasized its commitment to enhancing the perception of Virgin Galactic's common stock as a viable investment. The move seeks to recalibrate the stock price to more standard trading levels amidst what the company describes as "potentially extended market dislocation." Additionally, it aims to mitigate the considerable price volatility that currently characterizes the stock.

The filing acknowledges addressing the concerns regarding a possible delisting from the New York Stock Exchange (NYSE). 

The NYSE mandates a minimum share price of $1 over a 30-day period, a threshold that Virgin Galactic risks falling below without intervention. The company's board affirms its intent to execute the reverse stock split only if it deems it conducive to the company's and shareholders' interests, with the anticipated outcome being an improvement in the trading price of its common stock and the preservation of its NYSE listing.

Virgin Galactic's stock trajectory has been marked by a gradual decline since June of the preceding year when it soared to a 52-week high of approximately $6 per share, coinciding with the inaugural commercial flight of its VSS Unity suborbital spaceplane. Subsequent strategic decisions, notably the announcement in November to retire Unity by mid-2024 in favor of focusing on its next-generation Delta-class vehicle, slated for commercial service in 2026, have contributed to the shifting dynamics.

The company's trajectory in the public market began in 2019 through a special-purpose acquisition company (SPAC) merger, with share prices peaking at over $50 per share at various points in 2021. Parallel to Virgin Galactic's experience, other space companies that embarked on public offerings via SPAC mergers, including Astra, Momentus, and Spire, have similarly resorted to reverse stock splits to uphold their listings.

As Virgin Galactic navigates these strategic maneuvers, the upcoming shareholder vote on the proposed reverse stock split stands as a pivotal moment in shaping the company's trajectory in the financial markets and its pursuit of commercial spaceflight endeavors.